Errors, oil and lies in Venezuela's Bolivarian revolution

07.05.05 | So now, it is a campaign against PDVSA, according to the same President who admitted just two days ago, that there were indeed problems at PDVSA.
I actually heard him say it two days ago, he acknowledged not only the
lower production, but he even said it had been worse, he talked about
“problems”, being below OPEC quota and they were studying whether there
was some form of sabotage.

But tonight it is a different matter, according to Chavez, it is a campaign against PDVSA from abroad,
hey, as far as I know the only person that has spoken on the issue from
abroad has been the President of PDVSA Ramirez. The other spokesmen
have been: President Chavez, Minister of Defense Garcia Carneiro,
General Melvin Lopez (I would hate to be General Melvin too!), Minister
(or President you choose) Ramirez, two union leaders, one pro-Chavez
-who said that PDVSA people were not doing their job-,one anti
Chavez,-who said PDVSA people were not doing their job. And then there
was an article in El Universal, but that is a separate story.

The
anti-Chavez union leader gave out numbers on Western oil production,
they looked bad, but I have no idea where he got them. Today’s El
Nacional talks about a “survey” in Western Venezuela and gives equally
horrific numbers with things such as drills down 53% from pre-strike
levels, active wells down 37%, electricity consumption down 37%. But
once again I am not sure how this survey was done.

To
clarify for my readers, the big deal about oil production in Western
Venezuela is that this area has high quality crudes, almost half the
oil production pre-strike of the country (1.4 million barrels a day),
but the wells are old, very old. That means you need to invest
regularly on maintanance. And yes, the Western area, particularly Zulia
state, is the most anti-Chavez area of the whole country.

But
hey, anyone reading this blog who is pro-Chavez could say I am lying
thru my teeth, El Nacional is lying, the union leaders are lying so
let’s us look at two very simple graphs:

Below is the price of oil since Jan. 2003 for WTI as compiled by Bloomberg
(Not a CIA source). What is important here is that the average price of
oil was roughly US$ 27 in the first quarter of 2003, $30 in the next
two quarters, $28 in the last quarter 2003, $33 in 1Q04, $38 in 2Q04,
$44 in 3Q04, $48 in 4Q04 and $49 in 1Q05, give or take one dollar. This
is not for the Venezuelan oil basket, but that price scales quite well
with WTI.>

Plot I. Price in US dollars for WTI per barrel in the last six years.

In the second graph below we show a plot published in today’s El Universal

of OIL GDP
in the same quarters as the oil prices discussed before but only since
1Q03. That quarter, oil GDP was down significantly because of the
strike. Let’s jump straight to 1Q04 when oil GDP was up 64.7%. Why?
Simple, the weird methodology used by the Central Bank compares one
quarter in one year to the same quarter the previous year. Obviously,
the quarter after the strike oil GDP was low and its growth was huge a
year later. This is where things start to get tricky. 2Q04 had to be
better than 2Q03, not only was oil production supposedly still
recovering in 2Q03, but the price was only $30 per barrel, versus $44
per barrel in 2Q04, an almost 46% increase that should be reflected in
oil GDP growing sharply, but oil GDP actually went down 0.6%.
The same phenomenon is observed in the next two quarters, oil goes up
to $44 per barrel in the third quarter ’04, up from $30, oil GDP shrinks 1.8%. Finally, in the 4Q04, oil jumped up to $48 from $28, but oil GDP drops by 5.9%!

It
does not take a rocket scientist to figure out that something is very
rotten somewhere. Clearly, production has gone steadily down in those
periods. There is simply no way to argue otherwise. Yes, I could show
the data for the Venezuelan oil basket, I could calculate better
averages than my eyeball figures, but oil GDP in the last three quarters should have gone up significantly, never down as the actual government-provided data shows. And then we come to Chavez’ attack on El Universal today. All El Universal did was to point out
that there was a discrepancy of 49% between the dollars that should
have been given to the Central Bank by PDVSA and those actually handed
out. We are talking about US$ 4.2 billion, yes four point two billion,
a one followed by nine zeroes. Chavez actually said
that there were “errors”. How many countries do you know with errors of
US$ 4.9 billion in one quarter! Maybe Mugabe can have that happen in
his fiefdom, but this was a democracy with reasonably transparent
numbers and rational leaders only six years ago, even if they were
terrible leaders! Chavez says the paper says little about the money
spent on housing (lowest hosuing completion in six years) or the
missions, or FUS, but the point is, there is a huge amount of money
missing and the President calls it an error and dismisses it. For God’s
sake, we are living in the XXIst. Century, the era of knowledge, the
era of computers and we are supposed to round off US$ 4.2 billion into
zero? So how can anyone believe him? How can anyone believe PDVSA
production is not down SIGNIFICANTLY. Where is the money? Where
are the houses? There is something rotten, very rotten in PDVSA and in
this Government and we should refuse to accept it! I challenge any
readers to explain away the data.

And poverty? Very well thanks, still going up!

Note added the next day: In today's newspapers
Chavez is quoted as saying that the reason that PDVSA does not turn
over al foreign currency to the Central Bank is that it is using part
of its funds to pay for misiones and social programs. Well, there is
someything funny there: How do they get Bolivars for that? If they
don't go thru the Central Bank they do it via the black market which is
obviously illegal. So, PDVSA
people have a lot to explain about where these dollars are. I think it
is all BS. But here is criminal evidence for the Prosecutor. Will he do
anything?